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Old 02-21-2010, 02:30 PM
Stevie Stevie is offline
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My CPA has told me to produce proof on the value of my 40'x80' insulated, bathroom/small office area workshop. He needs it to determine business depreciation, and wants something the IRS will accept in case of an audit(he says audits will/are on the increase for small businesses!)

I thought this info would be in my original appraisal from a few years back when I bought my current house, property, and buildings. But no. The appraisal only includes my house and the two acres plus out buildings it sets on. Doesn't even mention the 40x80 shop and other acres?

I bought this as one property, a 5 acre tract, house and buildings. Don't know why the big building wasn't appraised with the rest of the property?

All I can think to do is have the building itself appraised, check with the previous owner to see if he has any documentation of the buildings cost/value, check with my county offices for property tax building values, or have the building appraised myself.

Any ideas from the forum on how to document the value of my nice shop in an IRS suitable way?

Thanx, Stevie.
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Old 02-21-2010, 03:58 PM
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MO_mule MO_mule is offline
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Stevie:

I'm not a tax guru and I didn't sleep at a Holiday Inn last night but I think you have answered your own question. Have the building appraised and, if possible, ask the previous owner for any documents he may have about the building. It's odd (to me) that the previous owner would have kept documents but stranger things have happened.

The appraisal will cost you a little but you will have the documents that you need.

Chris
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Old 02-21-2010, 05:16 PM
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Cobroller Cobroller is offline
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An appraisal will probably cost more than the deduction is worth. I would use the county assesed valuation.
Have you not been deducting its use?
Is this a new business?
Is just the office used for business or the whole building?
As long as you are using a logical and reasonable basis and percentage of business use I wouldn't worry about it until an actual audit.
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Old 02-21-2010, 05:40 PM
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Quote:
Originally Posted by Cobroller View Post
An appraisal will probably cost more than the deduction is worth. I would use the county assesed valuation.
Have you not been deducting its use?
Is this a new business?
Is just the office used for business or the whole building?
As long as you are using a logical and reasonable basis and percentage of business use I wouldn't worry about it until an actual audit.
I agree..an appraisal would be a waste of money..an IRS auditor wouldn't give a blink to a 3200 sq.' pre-existing building capitalization unless it was outrageous..He or she will be looking at "expenses"..that's where the money is for recovery and penalties..

The logical and reasonable test is all that is required...If you construct your own "fair market value" for capitalization,just keep your notes on how you arrived at it "in good faith" ..any auditor will buy it..
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Old 02-21-2010, 05:48 PM
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I agree. Take your total appraised value per your county assessment. Deduct the land value which will leave you with the assessed value of the improvements. Allocate this amount to your residence and office building based on square footage. IRS will agree with this method.
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Old 02-21-2010, 06:16 PM
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If you take the depreciation now, when you sell you will pay cap gains on that portion. Some times its better not to take the write off.

I am not an accountant, just a small business guy trying to make a living. Ive ask these questions before and got this answer.
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Old 02-21-2010, 07:45 PM
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I agree wholeheartedly with what has been said here already....an appraisal is overkill. If this is the only questionable item on your return, the chances of being audited are negligible.

Brian~
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Old 02-21-2010, 09:32 PM
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Be glad it isn't appraised separately on your property record or you'd probably be paying a fat property tax on it. For depreciation purposes, I'd want the highest figure I could get by with. I'd call a builder and get a cost per sq foot estimate for building a new building and use that.
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Old 02-21-2010, 09:46 PM
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There you go, Stevie: no appraisal. It appears I need to spend a few nights at the Holiday Inn before April 15th.

Chris
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